David Sterman

Last summer, when Netflix (Nasdaq: NFLX) was messing with its pricing plans, alienating its customers in the process, I spotted a clear opening for rival Coinstar (Nasdaq: CSTR), which runs a kiosk-based DVD distribution system.

As I wrote then: "Thanks to Netflix, Coinstar's DVD business will thrive for even longer than some short sellers had predicted. This is because it's increasingly apparent that Redbox looks set to take some market share. Simply put, it's a better deal for customers."

Six months later, Coinstar is now posting stellar results, and its shares are up more than 40%. In fact, a just-announced deal with Verizon (NYSE: VZ) to enter the streaming video market has led some to conclude that Coinstar's run has only just begun.

Yet a deeper look behind Coinstar's income statement, along with an unvarnished look at that Verizon deal, implies that the stock's run is almost done. If you own this stock, then it may be time to take profits. And for short-sellers, a case may slowly build in coming quarters.

David Sterman

David Sterman has worked as an investment analyst for nearly two decades. He is currently an analyst for StreetAuthority.com

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